Huawei Goes Upscale in Uphill Climb for India's Smartphone Market

Asia old-timers might remember that particular ad campaign that dates back more than a decade and features prominent sites like the country’s famous Taj Mahal and other scenic spots. But these days it’s Chinese smartphone-makers that seem to be picking up the mantra, including rising superstar Huawei, which is finally making the land of Mahatma Gandhi and the Ganges River a major stop on its global roadmap.

India has given the world some of the most powerful IT outsourcing companies, but isn’t exactly known for much else in the high-tech realm of gizmos and gadgets like smartphones. That appears to be changing, however, as the country rolls out a raft of reforms that have set it on a similar economic development path to China, albeit about a decade behind.

The decade figure is actually quite significant, because it’s almost exactly a decade ago that Apple launched its signature iPhones in China. Since then the U.S. tech titan has built up a major business for its pricey smartphones in the country, and now earns a hefty 17% of its revenue from Greater China, more than twice what it gets from Japan.

I was surprised to learn that India just passed the U.S. to become the world’s second-largest smartphone market, now behind only China, according to the latest data from IDC. India smartphone shipments reached 43 million in this year’s third quarter, edging past the 40 million shipments for the U.S. I still remember the time around five years ago when China passed the U.S. to become the world’s largest smartphone market, and today it has squarely consolidated that spot with more than twice the U.S. figure each quarter, at least in terms of units sold.

With all that background in mind, it’s no huge surprise that Chinese companies, now including Huawei, see India as a smartphone diamond in the rough. Most of China’s other smartphone-makers, including the recently listed Xiaomi as well as Oppo, Vivo and OnePlus, have been selling aggressively in the market for the last few years. Xiaomi in particular has done an excellent job, and now accounts for nearly a third of all smartphone sales there.

Huawei has been a bit late to the game, though it appears to be positioning itself to play catch-up. That strategy has proven quite effective in its home China market, as well as in Western European markets where it has also become a major force. My personal view is that Huawei has evolved as a potent brand with a solid reputation for quality and after-sales service — something most of its Chinese rivals lack. Those factors and increasingly savvy marketing have allowed it to make up major ground in other markets despite its relatively late arrival.

India aside, the only other major hole in Huawei’s global roadmap is the U.S., where geopolitics have hindered its growth due to Washington’s lingering suspicions about links between the company and Beijing that could be used for spying. The company previously tried to form tie-ups with local carriers AT&T and Verizon, only to watch both deals collapse after the U.S. partners reportedly caved under pressure from Washington, according to previous reports.

High-End Blitz

All that said, we’ll spend the second half of this column looking at how Huawei has evolved in India over the past year, and its latest moves to play catch-up with the likes of Xiaomi and other China rivals, as well as its chances for success.

The company is still a bit player in India at the moment, ranking No. 7 in the third quarter with a roughly 3.2% share, according to IDC. While that may not look too exciting, it’s actually up quite a bit from a year earlier, when Huawei had a scant 0.5% share. The vast majority of its sales, around 95%, now come from its lower-end line of Honor brand smartphones, most of those sold through online channels.

But change was in the air last week when the company held an event to announce the local launch of its higher-end Mate Pro 20, which costs the equivalent of about $1,000 — a relatively hefty amount for this highly price-sensitive market. At the event a company executive further told local media Huawei was in the process of setting up 100 “experience zones” within brick-and-mortar stores operated by its local partners, and was aiming to expand that figure to 1,000 by 2020.

I’ve already given my personal view that Huawei seems pretty good at playing catch-up, and would add that this move into higher-end phones and a stronger brick-and-mortar presence both seem to fill in needed missing pieces to its India strategy. But to get a better sense of where things stand, I checked in with a couple of analysts who follow the local story more closely, one from IDC and the other from Gartner.

IDC’s Kiran Kaur pointed out that Huawei will face an uphill slog in India due to its relatively late arrival and entrenched position of names like Xiaomi. She further pointed out that phones costing more than $400 now account for less than 4% of the market, meaning the Mate Pro 20 is unlikely to find much of an audience. But she was quick to add the brick-and-mortar presence has been crucial for names like Xiaomi, and that the new approach should help Huawei.

Gartner’s Anshul Gupta was similarly skeptical, citing Huawei’s lack of brand recognition and sales channels, as well as relatively narrow product offerings. Like Kaur, he also praised Huawei’s setting up of “experience zones” as a much-needed step for a serious play for the market.

At the end of the day, we’ll probably need to wait until at least this time next year to see if Huawei’s latest play for India really has legs. But based on its previous experience playing effective catch-up in other markets, I certainly would think twice before betting against the company.

Doug Young has lived in Greater China for two decades, including a 10-year stint at Reuters, where he led China corporate news coverage. Send your questions or comments to DougYoung@caixin.com